Why the customer retention KPI matters

If you are a small business field service organization, you probably understand the emotional power of customer retention. When you start getting a series of customers who stay with you and can be counted on for revenue each month, it makes you feel better about the direction of your FSO -- and when those retained customers begin referring you to others, it makes you feel even better.

Even if you’re an enterprise-level FSO, you probably have a good sense of the power of customer retention. Many FSOs track customer acquisition costs religiously, and that is certainly a valuable metric to manage within your business. But while customer acquisition is important, it is only a small slice of the overall picture. That customer needs to be retained. Otherwise you are always looking for, and trying to acquire, new customers. That drives up your costs.

There are different ways to analyze this financially, but in general you want the lifetime value of a customer to be about three times the acquisition cost, because this allows you extra revenue for growth opportunities.

How can you make the lifetime value of a customer three times more than the cost to acquire that customer?

You obviously need to retain your customers for a long enough period that their values start to grow.

In a nutshell, this is all why customer retention is crucially important to a FSO at any stage of growth. And that is why you need a key performance indicator around customer retention -- or several tied to customer retention -- and you need to be tracking them regularly to see where your gaps are.

In numerous field service organizations these days, you are seeing a push toward real-time KPIs and dashboard usage as a way to monitor the health and growth of the business. A decade or more ago, you might have seen more meetings and status reports and memos. Now decision-makers in your FSO can login to their CRM or FSM software, pull up the KPIs and reports they need, and look at what is happening, real-time, around the business. When done properly, it leads to effective flow of information and smoother decision-making.

We put together an entire eBook on key real-time KPIs to monitor in your FSO, as well as the role of dashboards in strategy planning and priority management. Customer retention is an important piece of the puzzle, but we have put together seven other KPIs and more. You can download the eBook now.

If you have any questions about customer retention or other field service KPIs, do not hesitate to contact us.

Written by Jim Hare